Financial Transmission Rights (FTR) credit requirements are based on discounted historical path prices. Cleared FTR credit requirements for individual paths can be positive or negative, and are netted when calculating the final cleared credit
requirement.
PJM has observed some potential FTR exposures that are not addressed by existing FTR credit requirement provisions.
These exposures fall in two general categories:
1. Historical congestion patterns, which underlie historical path prices that form the basis for credit requirements, vary significantly from expected future congestion patterns. This occurs on paths that are affected by recent or future Regional Transmission Expansion Plan (RTEP) changes, other transmission upgrades or extended outages.
2. Large FTR portfolios exist with little or no credit requirement. This is typically due to:
a. FTRs with small or negative credit requirement netting out positive requirements, and
b. Lack of a minimum FTR credit requirement PJM believes that explicit Tariff provisions to deal with these issues would be beneficial to the PJM membership by reducing the chance of default and resulting default allocation assessments. Explicit provisions would also provide more certainty and
transparency to members and inform member expectations of the amount of collateral that would need to be posted for market activity